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When you’re a kid, it is sometimes difficult to really understand the value of money. I get that. Kids, for the most part, are provided for and given everything they need by their parents. As a Mortgage Consultant for a local community bank, I’ve always found it very important and tried very hard to ensure that my kids understand the true value of money. It takes time and constant reinforcement, but I really think they are getting it. I wanted to share with you how I’m trying to do that.

When each of my kids turn 5 or 6, they have had assigned daily chores to complete. These are age appropriate chores that are not overly difficult to complete. Examples: water the plants, vacuum the carpet, clean your room, wipe the counters, take the trash/recycling to the curb, bring the trash cans back from the curb, etc. In a household with four kids, there are always things to do. So, there is a chore assigned for each day except for Saturday; yes, even my kids get a day off from work. 🙂

For their hard work, I pay them $3/week. As they get older, they get paid a little higher allowance. Every other week, they have to put their allowance into their savings account at the bank. The money that goes into their savings account is not to be touched or used for anything unless approved by me or their Mom. Ideally, these savings will be used to help them buy a car or help to pay for college expenses later. Whatever it ends up being used for in the future, the point is that it is not be used for fun stuff now in their life.

Tyson and his new Aaron Rodgers Packers jersey

My son Tyson is getting it quickly. He is the oldest of my kids and has an allowance of $5/week now. So after he puts his $5 in the bank every other week, he nets a grand total of $10/month of spending money (on normal months). He’s turned into a good saver with his spending money, because he has come to realize that the “fun things” in life cost more than $5-$10 (XBox game: $40-$50, DSI game: $25-$35).

He recently purchased an authentic Aaron Rodgers Green Bay Packers football jersey. This kid loves football and LOVES his Green Bay Packers. He used to be a huge Brett Favre fan, and he even cried one time when Favre was injured and knocked out of a game. (Now he thinks Favre is a sell-out, but that’s another story) Anyway, when he saw the jersey in the store, he “had to have it.” He took a look at the price tag of $39.95, and didn’t even blink. We talked about how that is about 4 months worth allowance and how long it would take to save that much money, but the kid was determined and made it happen. Because it was important to him.

To contrast that with another example of this: I was working from home the other day, and talking to a client on the phone about how much their mortgage would cost them over 30 years. Tyson overheard some of the conversation and was appalled that I was charging the person over $150K in interest on the mortgage. When I finished the call, he asked me why I was “ripping them off” by charging them so much in interest. I had to explain to him that because the client wanted to have their payments be lower and pay the loan back over 30 years, that the cost in interest would be much higher. It wasn’t all that different than his Packers jersey purchase on some levels: they wanted to own a home and were making a financial choice based on what was important to them. They didn’t have the $140K in cash to purchase a home and made the decision to borrow the money and pay back a lot of money in interest. But it was worth it to them to pay that interest just like it was worth it to him to save his money and buy the jersey.

His asking that question of me proved to me that he is getting it. He has developed a value system in his mind that made that Packers jersey purchase worth it. Now, I’m not going to start financing my son’s XBox game purchases anytime soon, but it’s a good start for him with seeing things like this. When I tell him that we’re not going to go to the movies and spend $30 tonight, but rather are going to go rent a movie from RedBox for $1, he has an appreciation for why we’re making that decision. I’ve even lent him $5 and had him pay me back $6 later…how’s that for a high interest rate! He didn’t like that arrangement either, but made a decision to pay $6 later for $5 now…because it was worth it.

What strategies do you have to help teach kids the value of money? What are you seeing in kids that make you think they are getting it? Comment and share…I’d love to hear. I’m always looking for new and better ideas to help teach my kids about finances.

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